When parents co‑sign a mortgage to help their adult children buy their first home

Rising housing costs are leading to an increasing share of first‑time homebuyers seeking financial support from their parents. Specifically, Canada has experienced a noticeable rise in instances of parents co‑signing mortgages with their adult children. This practice allows buyers to purchase more expensive homes—but it can also make both parties vulnerable to financial disruptions.

Over the past two decades, house prices have risen faster than incomes. During this time, the rules to qualify for a mortgage have become stricter. Together, these circumstances have left some first‑time homebuyers unable to qualify for a mortgage and enter the housing market.

Because of this, many have turned to their parents for help.

To qualify for a mortgage, borrowers must meet two main criteria:

• They need to make a minimum down payment.
• They need to prove that their income can cover both their monthly debt payments and their housing‑related expenses.

Parents can help their adult children cover the down payment by gifting them money. They can also help their children meet the income criterion by co‑signing a mortgage. In doing so, they add their income to their children’s income and provide the lender with greater legal assurance about repayment. Co‑signing not only enables first‑time homebuyers to more easily qualify for a mortgage, but it also allows them to qualify for larger loans and purchase more expensive homes than they could on their own.

An analysis I did with some colleagues shows that in Canada, instances of parents co‑signing mortgages with their adult children have risen sharply since 2004. And buyers have been purchasing more expensive homes as a result. But co‑signing can also make household finances more vulnerable, which in turn poses risks to financial stability.

The share of mortgages being co‑signed by parents has risen

To conduct this analysis, my colleagues and I use anonymized credit data from TransUnion. These data do not include any information that identifies individual Canadians. We also leverage a dataset that links the TransUnion data with mortgage contract data—also anonymized—compiled by the Office of the Superintendent of Financial Institutions.

Our analysis focuses on mortgages granted to first‑time homebuyers who are under 50 years of age. For mortgages with multiple borrowers, loans are considered co‑signed by parents if the age gap between the oldest and youngest borrowers exceeds 18 years—a plausible assumption.

Using these parameters, we find that of all mortgages issued to first‑time homebuyers in Canada, the share of those that are co‑signed with a parent has risen from 4% in 2004 to about 11% in 2025 (Chart 1). The practice is especially prevalent in Canada’s largest and most expensive housing markets, such as Toronto and Vancouver, where affordability pressures are most intense. Co‑signing is also more common among first‑time buyers who are younger and who have lower credit scores and lower incomes.

Parental co‑signing raises the purchasing power of first‑time homebuyers

Parental co‑signing can make a significant difference in the housing outcomes of adult children. To quantify this difference, we start by asking a simple question: what if parents had not co‑signed?

The answer we find is that 74% of adult children would not have qualified for their current mortgage.

This leads to a second question: what would those buyers have been able to afford without parental support? Looking at the fourth quarter of 2022, we find that they would have been able to afford, on average, a $458,000 home (Chart 2). Having a parent co‑sign on a mortgage raised their maximum attainable house price to $787,000. This means that parental support increased purchasing power by about 72%.

Most adult children who resorted to parental co‑signing made use of this extra purchasing power by buying homes that would otherwise have been out of reach. As a result, the average purchase price of a home for these buyers in the fourth quarter of 2022 was $709,000—about 55% or roughly $250,000 more than the maximum these buyers could have afforded on their own.

For context, in the same period, the average purchase price among first‑time homebuyers without parental co‑signing was $628,000. This suggests that many of the first‑time buyers with co‑signed mortgages would likely not have been able to afford their desired home without a parent’s signature on the mortgage.

Parental co‑signing may also increase financial vulnerability

While parental co‑signing can facilitate a home purchase for adult children, it can also open the door to potential financial distress. This is because, as noted earlier, co‑signing enables many adult children to take on larger mortgages than they could afford on their own. Consequently, the financial positions of both the first‑time buyers and their parents matter. Co‑signing can leave both parties more vulnerable to a sharp deterioration in either party’s financial situation.

Just how vulnerable co‑signers could become may depend on their use of the extra spending room that parental co‑signing enables. For example, Chart 2 suggests that buyers used just over three‑quarters of this additional purchasing power—specifically, a utilization rate of 76%.

The utilization rate may help identify whether some borrowers might have problems making regular credit payments in the future. To explore this further, my colleagues and I group borrowers by their utilization rate and examine how credit performance varies across groups. We find that the group with the highest utilization rate tends to have the largest average increase in delinquency rates on credit products, such as credit cards or lines of credit (Chart 3). In other words, stretching further to buy a more expensive home appears to be associated with a higher risk of financial stress later on.

We focus on the change in delinquency rates before and after homebuyers take on co‑signed mortgages. This allows us to control for characteristics that might make borrowers more likely to experience financial stress in the first place, such as lower income, weaker credit score or other unobserved risk factors.

The potential risks of co‑signing are not limited to first‑time homebuyers. Around one‑third of parents who co‑sign a mortgage already have a mortgage of their own. By co‑signing, they increase their exposure to the housing and mortgage markets and may face financial pressure if their children run into repayment difficulties. This is because co‑signing parents are legally required to cover the regular mortgage payments if their children cannot.

Rising parental co‑signing could have implications for financial stability

For many families, co‑signing is a choice that is not made lightly. It’s a practical response to how expensive some housing markets have become and to how difficult it can be to secure a mortgage with a lender. In this type of environment, parental support can make all the difference when trying to buy that first home.

But the growing reliance on mortgage co‑signing may represent an emerging vulnerability for the financial system. These dynamics are worth monitoring closely because mortgages are both the largest liability for households and the largest assets for banks.

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